Three More Myths About Starting Your Own Business

Have you ever thought about starting your own company? Based on your responses to my recent article "Three Myths About Starting Your Own Business" (read it here), many of you have. You've told me you want to create the next
Google
or
Apple
or become a billionaire like Amazon's Jeff Bezos. Or you've told me you feel stifled in a large organization and want to free yourself from bureaucracy and political infighting. In this terrible job market, you may even consider it your best shot at paying the bills.

Whatever your reason is for starting your own business, it can be a very exciting time. Whenever I start a new company--I have launched three and invested in countless others--electricity pulses through my veins as I think about the possibilities. Will I disrupt the current order and change the world? Will I become rich and famous? It's exhilarating, but it isn't easy. I've failed more often than I've succeeded, and I've made lots of sacrifices along the way. Luckily I've had a supportive family through the ups and downs of entrepreneurship, even when I had to use a string of credit cards to buy my wife's engagement ring. (See my article "How To Be A Billionaire").

As I wrote before, I've found along the way that most of the conventional wisdom about starting your own business is really just myths. If you're thinking about starting your own firm, here are three more myths to rid yourself of to get a head start toward hitting your goals. (The first three myths were, in brief, that you should spend a lot of time preparing detailed business plans, that you need to come up with the coolest, most innovative product and that you can fob off difficult and unwanted work on others.)

The fourth myth about starting your own business is that you need to spend money to make money. In fact, you absolutely must keep your costs down and question and question again every purchase. Pennies really matter when you're starting out.

Far too many entrepreneurs spend far too much getting nice offices and the same top-of-the-line equipment they had when working for large corporations. They imagine that clients and potential employees will take them seriously only if they have the trappings of success all around their offices. They also want to enjoy the same work environment they had when working for a big business. That is just silly. Many of these big-spending entrepreneurs have great business models and are talented executives, but more often than not they fail because they run out of cash.

Don't waste money, especially on office space and fixed equipment costs, except when it's essential. Clients don't want to come to your office. They don't want to waste their time. Go to them. Find a cheap office with a decent location that makes it easy to travel to meetings without spending lots on gas and parking. Question what is really essential. Do you truly need that thousand-dollar cappuccino machine, or a mahogany conference table or video conferencing equipment? Can you turn the heat down a bit, or use fans rather than air conditioning?

In the businesses I've started I've cut costs wherever possible. I have combed through junkyards for third- and fourth-hand furniture. My firm saves $50,000 a year by using Skype for long-distance calls rather than
Cisco's
Webex. On business trips we sleep two to a room in budget hotels and try to do everything electronically to save on ink and paper costs. Anything that you spend money on should directly affect the bottom line.

The fifth myth is that you need an MBA or lots of experience to succeed as an entrepreneur. In fact, getting a business degree can often reduce your motivation, because it gives you too many high-paying career options--golden handcuffs. MBAs get offered six-figure packages straight out of school by firms like
Goldman Sachs
. That kind of money is hard to turn down, especially as you get older and start to have family and a mortgage to worry about. Entrepreneurs often succeed because they have no other choice. No one will hire them, and they have to make things work or they'll go hungry. That live-or-die pressure is great for propelling an entrepreneur to greatness.

Similarly, many people think they need to work at an established business first to get experience before starting out on their own. But experience can actually get in your way. Entrepreneurship is about having a vision, about filling a gap that others either have not seen or have tried and failed to get at. In many ways, the arrogance and naiveté of youth are helpful. Look at how many of the great entrepreneurs, like Bill Gates of
Microsoft
,
Dell
founder Michael Dell and Facebook's Mark Zuckerberg, dropped out of college.

Too much experience can often make you overlook new trends and, crucially, assume that things can't be done. It makes you very aware of how difficult things can be, which sometimes can stop you. If you do want to get experience first, I'd suggest you work for another startup or as a brand manager for a product where you have your own profit-and-loss responsibility. Don't let your youth, lack of education or limited experience stop you from starting your own business.

The sixth myth about entrepreneurship is that you should try to raise money from venture capitalists. Lots of business school professors and consultants seem to think VC money is always the best route. After all, many companies that became among the biggest in the world, from
Starbucks
to
Intel
, took it. The experience and networks can be even more valuable for entrepreneurs than the capital itself.

However, you need to be very cautious when you work with venture capitalists. They often have different motives from your own. You might have dedicated a decade of your life to building a company and be willing to wait another five years to go public and hit the big time. But many VC firms would push for a sale as soon as possible, so they could show their investors, their limited partners, that they had rung up another successful exit and could now raise another fund. If that happened, they might make enough money while leaving you with too little to show for all those years of sacrifice.

If you do decide to go the venture capital route, don't do it too soon or your firm will receive a low valuation and you'll waste too much time you'd have better spent generating sales. I have seen plenty of entrepreneurs use up valuable early-stage months looking to raise money from venture capitalists who really wanted to see a proven business model and cash flow before seriously looking at investing.

Instead of running around Silicon Valley, focus on your business, building revenues and profits and doing whatever you can to keep your costs as low as possible. If you really do have a good business model, the venture capitalists will find you. And by then your firm will be worth a lot more.

Shaun Rein is the founder and managing director of the China Market Research Group, a strategic market intelligence firm. He writes for Forbes on leadership, marketing and China. Follow him on Twitter @shaunrein.